Revised State Budget presented

The State Budget for 2006 as well as the latest forecasts for 2005

were submitted to the House of Representatives on Thursday, aiming for a budget deficit of CTP 143 mln, or 1.7% of GDP, compared with an estimated 2.9% of GDP in 2005. Without cost-cutting measures planned by the government, the deficit is forecast to reach 3.7% of GDP.

Cost-cutting measures include implementing the gradual increase in the public-sector retirement age from 60 to 63, higher fees for property transactions, and the issuance of those title deeds that have been held up owing to minor deviations from plans.

Improved tax collection, which looks like it will target the seelf-employed next, is also part of additional measures.

Public expenditure excluding loan repayments is expected to rise by 6.1% to reach CYP 3,307 mln, compared with CYP 3,117 mln in 2005. while revenue excluding capital income is expected to rise by 1.35% to CYP 2,325 mln, compared with CYP 2,409 mln in 2004.

The figures are slightly different from those approved by the Council of Ministers in August.

Indirect taxes account for 57.6% of total revenues while indirect revenue accounts for 29.3%.

Payroll expenses account for 30% of the total expenditure while an 11.1% is attributed to social benefits, a 10.7% to public debt financing, 9% on loans repayments and an 8% on transfers.

The government proposed a 2% limit on ordinary expenditure excluding wages and salaries but allowed for a 6% increase in capital expenditure.

Gov’t forecasts 5% growth in 2005

Real GDP growth is expected to reach 4.0% in 2005, up from 3.7% in 2004, while the budget deficit is expected to reach 2.9% of GDP in 2005, compared with 4.2% of GDP in 2004.

Overall debt is expected to decline to 72.1% of GDP in 2004, to 68.6% of GDP in 2005.

Inflation is expected to reach 2.5% in 2005, compared with 2.3% in 2004, while unemployment is expected to rise to 3.8%, compared with 2.6% in 2004.